Monday, June 18, 2012

Land-banking firm Walton says it's not like scam-tainted firms

Land-banking firm Walton says it's not like scam-tainted firms and has never lost clients' money. By Felda Chay

IT'S been a year since landbanking firms in Singapore were brought to their knees following a widely publicised scandal where one company lost its clients' money, and land investment firm Walton International Group Inc was no exception. The company, which received a flurry of calls from worried investors seeking reassurance in the immediate aftermath of the industry fiasco, has had to deal with the suspicion shrouding investments in raw land since. Type 'Walton International' into the Google search engine, for instance, and phrases such as 'Walton International scam' and 'Walton International complaints' appear.

But Walton is not like them, said the group's chief executive Bill Doherty to Singapore media, in reference to the company that had gone under with its investors' money. 'We have never lost our clients' money.' This is a point that he, and Walton's top management, reiterated numerous times during a three-day visit made in early September to the company's headquarters in Calgary, Canada, which was paid for by the company.

Lands that Walton has bought with its investors, for instance, have been sold to developers who see potential in the plots. Its investors have also been duly rewarded with returns on their investments.

According to Walton, the annualised total return for projects it exited from late 1998 to end 2010 amounted to between 5.2 per cent and as high as over 50 per cent. These numbers were audited by PricewaterhouseCoopers according to generally accepted standards in Canada.

Walton markets land in Canada and the United States, and has been in Singapore since 1996. Some 18,000 of its 74,000 investors are located here. The group is owned by Mr Doherty's family, and was established under the Walton name in 1986.

Mr Doherty said that scandals involving raw land investment firms have popped up not just in Singapore, but also in Canada. The company now has to grapple with the belief that anything which sounds too good to be true, is too good to be true; if such investments were so lucrative, companies would be better served by keeping these deals to themselves.

Not true, said Mr Doherty. Land investment firms partner investors to buy land because it allows them to free up capital and purchase more and bigger plots, widening their reach. So it makes sense to bring in investors who are willing to plough their money into land.

'We have a strong cash position,' said Mr Doherty. Walton said that it has seen a 196 per cent jump in the amount of cash held in 2010 from 2008, though it did not give figures on the actual amount of cash it is sitting on.

Unlike some of its now-defunct peers, Walton does not promise investors a handsome yearly dividend on their land investments. Instead, returns are paid out when its investors exit a project. 'The system of paying a yearly dividend doesn't make sense because holding land doesn't pay you an income. It doesn't,' said Mr Doherty. 'It is not a cash-flowing, income-producing asset, so it makes no sense.'

Scandals aside, critics of raw land investment have pointed out that it is an unlicensed product in Singapore and therefore does not fall under the purview of the Monetary Authority of Singapore (MAS). This means that investors may have few avenues through which to seek recourse, raising the risk factor of raw land investment.

Raw land investment is also an illiquid venture. Walton's investors have had to sit on their investments for as long as 19 years - the longest they had to wait to see returns from the pre-development projects they put money in. Even the shortest wait took about two years. On average, Walton's investors have had to wait about seven years before their investments bore fruit. There is also the worry that key assumptions of the land investment firm do not hold: In other words, the purchased land may never undergo development.

Mr Doherty acknowledged that the investment is illiquid, but believes that the firm's value proposition is its track record in delivering returns. 'Our track record is this: No one has ever lost money when investing with Walton if they had stuck with our programme. Our returns, on average, are 15 per cent compound after fees,' said Mr Doherty.

On raw land investment being an unlicensed product, Leslie Fryers, Walton's executive vice-president of law, said: 'There is no legal requirement for us to be licensed in Singapore.'

Also, investing in land 'is like buying a house, a piece of property', she said.

'We've certainly had legal opinions delivered to us that there is no requirement from MAS for a regulation on our product.

'It's our land that we are selling and we control it and we have very, very disciplined, very focused procedures to ensure that the purchase and sale agreements are properly registered and titled back to investors.' She added that the group gives client regular updates on their investments. Still, Walton would consider licensing its product 'if that is the way Singapore would like the product to be sold', said Ms Fryers. 'We already have the necessary processes in place both in Canada and the United States. It wouldn't worry us but from our perspective, it is certainly cleaner for the purchaser to have a direct ownership of the land as opposed to having an interest in an entity which has registration ownership of the land'.

The group also tries to minimise the risk of its land investments never undergoing development. Key to its investment strategy is strong research into the development potential of the ground it is eyeing, which takes years to complete. This involves looking into 'anything related to urbanisation', said Walton's executive vice-president of land research and acquisitions, Sean Cooney.

'Market statistics, political analysis, environment analysis, financial analysis. You name it, we are researching it. It is a very comprehensive view. The job is done on the ground in the truck. You can read any spreadsheet, you can read any headline, but if you're not in your truck looking at how the market is growing on a day-to-day measurement, you are completely oblivious to that market,' said Mr Cooney.

Thorough research

People and groups that Walton talks to as part of its research include landowners, bankers, real estate brokers, engineering companies and law firms, basically 'any group that is an active participant in development', said Mr Cooney. 'If you talk to enough people over a period of time, usually two years, you then get a sense of the long-term vision of growth in that area'.

Walton has spent between two-four years researching each piece of land it purchased, a process that has cost the company up to US$2 million annually, said Mr Cooney. It is such a lengthy process because the firm tries to talk to every single individual living around the area it is keen to own, to ensure that everyone's plans are in sync. 'If you buy one piece of dirt you need to understand what all the neighbours want to do over the long term with their lands,' said Mr Cooney. 'You buy land in a community context you need to understand everyone in the community.'

Once the research team gives its nod of approval, the decision on whether to plough money into a plot falls on the shoulders of Walton's executive buying committee, which has the final say on a purchase. The additional check and balance is meant to ensure that the land can be planned and will be developed eventually.

There were times - and more often than Mr Cooney likes - when the committee decides not to go ahead with a purchase despite the research team's endorsement. According to him, 20 per cent of the pieces of land brought to the buying committee do not get the green light for purchase. He believes that these land parcels ultimately failed to gain approval because of Walton's very stringent standards.

'And that in itself reduces the risk of our investment,' said Mr Cooney. 'It protects Walton, it protects the investors, it protects the various entitles through which we hold these investments under.'

Its a simple concept people. Buy & Wait. Nobody said buy & get rich quick. Buy bare land, rezone it, and wait for the cities to sprawl and eventually sell it. It may take 5 years, it may take 15 years. its not rocket science. I've invested in 3 projects over the past 13 years, and sold out of 2 within 9yrs. The 3rd is in the US and due to the real estate problem in 2008, I don't imagine we'll be out of that project for at least 4 more yrs. That's not Walton's fault. Its simple economics and market cycles. But if that is a Ponzi scheme to you, then go smoke another dubie, obviously its too complex for you. Geez this world is full of stupid people.

When u buy anything without doing research is risky. Same as stocks and shares, isn't it? Be prudent in doing research for any investment. Also Walton is not just a land banking company, they develope land!!!

There are of course some land banking companies closed down, but pls research their past record, if they have at lease 10 years of positive audit records and sound business strategies? Do not invest blindly but do some fact findings, instead of assuming and bashing company that is seriously making money out there.

Hi,I believe that you will find my post very interesting yet leave you very concerned if you are an investor.

ASIAN INVESTORS BEWARE!I live in Canada and have witnessed how how successful Walton has become over the years.

This is the key to their success.Walton buys farm land from farmer at approximately $2,000 to $18,000 per acre depending where the land is located. Walton used to in the early years sell that land to Canadian investors for approximately $20,000 to $50,000 per acre.This same land after they built up their sales force in Asia was resold to Asian investors anywhere from $80,000 to $120,000 per acre undivided interest in land. Asian investors jumped on this as they always compared it to the value of land in Hong Kong, Singapore or Malaysia. The same land was resold to Asian investors showing the Canadian investors a great return. That is the reason you used to see certain projects were only available to Asian investors as you couldn't sell it to the Canadians at that higher price.Remember the sales force in Asia is unsophisticated with knowledge on the Canadian land sales and the amount of land that is available. They promote these and were encouraged to sell these firstly to friends and family. The commissions payable to sales reps was astonishing, usually anywhere from 10% to 50%. For an Asian sales rep that is a huge pay day. Many of the former sales teams in Asia are millionaires because of this. Research the law suit with Winston Yau in Singapore.

I live in Canada in an area that is close to some substantial Walton Investments. I love the term raw land. Does actively farmed land deserve the title "Raw" These guys come in and offer farmers thousands of dollars per acre more than their land is worth. This greed on everyone's part has destroyed families. So eventually Walton may get their way and have some uninspired development but the cost to the local people and the destruction of neighbourhood character is beyond good business ethics.

Mr. Doherty has a strong cash position because he takes his money out first. The investors have all their money tied up until it sells or has the land developed. Tell me which investors in Asia received 50% return??

It is a scam.... They do not care after you have invested. They are just interested in your money & would not listen to you when you want to resell (they will ask you to sell at a LOSS) when you need the money back, better say your prayers or call CaD - police. They will not help or listen to you.

They will only say" willing buyer, willing seller" then they will delay, procrastinate & prolong the case until u file for bankruptcy.

Canadian land will only exit 20-25 years when they promise only 3-5 years.... There are hardly any exits & they won't show you any supporting data.... Pls go get yourself scammed like I did 8 years ago.... This is the utmost biggest regret that I have with my hard earned money!!!"